and avoidance of repeating mistakes.
Chapter 10 – Summary
All of the previous chapters have dealt with specific topics and are somewhat siloed. However, this chapter will connect all of the dots so that a structured approach to product development can occur. A process flow diagram will demonstrate the activities that occur from beginning to end.
Takeaways from this book.
Product development has substantial costs and risks, but also high potential.
Both managerial and technical excellence are required for success.
Successful product development requires the use of project management techniques.
The world does not revolve around engineering, science, marketing, or IT, it revolves around profitability.
Product development is a team effort generally requiring talent from different functional areas.
Product development is often led by a senior-level marketing person. Other times, it may be someone from R&D or engineering.
Bringing a product to launch within schedule and budget is very important. If late, competitors may be first to market or have a better product. If costs spiral out of control, it may take years to recover the investment costs and the product may never be profitable.
Engineering modeling can significantly reduce product development time and minimize the need for prototypes.
As a product goes through development, ergonomics (human engineering) should be a design factor.
Products should be designed assuming they will be misused – either by accident or intentionally – so that possible product liability can be minimized.
2 The Role of Marketing in Product Development
Corporate Strategy – Strategic Planning
What is strategic planning? This can mean different things to different people. While strategy can be used to guide a company to the next level of performance or change the corporate culture, in product development, strategy can help bring focus. Even corporations get operational plans (short-term focus) mixed up with strategic plans (long-term focus). Essentially, the strategic plan is performed at the highest levels of corporate leadership and may even involve the firm’s Board of Directors.
A strategic plan (corporate strategy) should focus on long-term actions to move the company in a new direction. For years, Coca-Cola was primarily distributing its iconic soft drinks through distributors all over the world. However, as people became more concerned about sugar and corn syrup content in soft drinks, Coke, and other drink makers, decided as a strategic decision to augment their portfolio of products. This now includes Dasani® bottled water, Minute Maid® fruit juices, as well as several tea and coffee products. A conscious decision (or strategy) was made to diversify Coke’s product mix to better serve their customers’ tastes. Their largest competitor, namely PepsiCo, has followed the same strategy and offers not only a variety of beverages, but also various food lines, including Frito-Lay® and Quaker Oats®.
For technology companies, there is a similar approach to offer a continuous stream of new products. If we look at Apple, their initial offering was their innovative computers and operating system. But the firm has evolved to offer a plethora of new and different products. At one point, Apple was bringing in more revenue with iTunes than with their computer business. Added to the mix are the iPhone and iPad. Clearly, their corporate strategy has included diversification and innovation, and is driving the firm to develop new products and services. It is important to note that corporate strategy will drive innovation and provide the funding for R&D, which also includes funding for new products.
Figure 2.1 Where Do Ideas Come From? suggests that companies have many avenues to generate ideas, both internal and external. Usually, anyone within a corporation can offer suggestions and ideas. At some point, the ideas will percolate to senior management, who will decide the merits of each suggestion and whether to direct company resources (people and dollars) in this direction.
Figure 2.1 Where Do Ideas Come From? Figure by David Tennant
This is related to innovation. How do we define innovation? Here is a concise definition:
Innovation is a process by which a domain, a product, or service is renewed and brought up to date by applying new processes, introducing new techniques, or establishing successful ideas to create new value.1
Innovation is what drives new products. How do we innovate? Innovation implies that your firm has a creative spark, or the founder has an idea that no one has yet thought of. Innovation is not something you can learn in school or from a co-worker. Innovation comes from creative people.
Many times, innovation comes from someone being aware of a market direction or trend. Others may think about how technology changes can be incorporated into a new product or software application. Also, new regulatory rulings can fuel a market need for compliance. True innovators are rare (think Nikola Tesla, Elon Musk, or Richard Branson – they all started from scratch) but working together with a partner or team of people can create synergies that, combined, can develop interesting new ideas or even an advancement of an existing idea.
All companies need to exhibit some form of innovation to survive. This is sometimes driven by the company founder, who generates ideas non-stop that have not been thought of before. We can also think of innovation as a form of creativity or imagination, but this is not something we can learn in school or by taking a course. Some people are just more creative than others.
It must be noted that innovation and new products are the future profits and livelihood of the corporation. A company cannot sit on its laurels, it must continue to generate new products. If one looks at a list of the top US companies (Forbes or similar) 40 years ago and compare this list with today’s top companies, you will find the list is very dynamic and different. Table 2.1 shows the Fortune 500 list of companies for 1980 and 2020. They are listed by revenue; however, column three is listed by profitability, which is different.
Table 2.1 Largesr US Companies 1980 vs. 2020 Revenue.1
| Rank | Company2 1980 | 1980 Revenue | Company3 2020 | 2020 Revenue | Most Profitable4 2020 |
|---|---|---|---|---|---|
| 1 | Exxon-Mobil | $ 79.1 | Wal-Mart | $ 524.0 | Apple |
| 2 | Gen. Motors | $ 66.3 | Amazon | $ 281.0 | Microsoft |
| 3 |
Mobil
|